Energy Company Licence Revocation

Baroness Laing of Elderslie Excerpts

Wednesday 3rd September 2014 Commons Chamber

[Huw Irranca-Davies]

The right hon. Gentleman is making a good point in that competition can drive improvement in a number of areas. But badly regulated competition leading to market failure is an issue not just with the big six but with potential new entrants, which could be doing well at the moment but they could fail or overstretch themselves. May I suggest to him that there is a straightforward analogy that any football or rugby supporter will understand? As rules are imposed on that game, players know that if they do something stupid, they will end up in the sin bin for 10 minutes on a rugby pitch. If they do it again, they will be off the field. If they do a spear tackle, they will be red-carded and could be banned for months. If they assault somebody on the field, they could end up in jail. We are not saying that these things should not be used. Companies will want to avoid them being used. The fact that they are there drives good behaviour.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. I am sure that the hon. Gentleman intended to be brief.

[Mr Davey]

When a Welsh MP gives a rugby analogy, one should be careful. However, I will address that point, because I have a lot of sympathy with what the hon. Gentleman is saying. I am grateful that he at least recognises that competition has a role to play. Technology also has a key role to play. The smart meter roll-out, for example, will be crucial in tackling some of the issues that consumers complain most about, especially inaccurate bills. Smart metering will help us to address even more problems faced by prepayment meter customers and it will enable 24-hour switching. So technology and competition are important in addressing these matters, and we need to have them on the table.

Despite those differences, there is no disagreement between parties over the importance of the regulation tool. Strong regulation has a vital role to play in protecting consumers. The previous Labour Government recognised that, and set up Ofgem. Indeed the Leader of the Opposition, when he was doing my job, reformed Ofgem to give it more powers to protect the consumer. He chose not to give it the power that the right hon. Lady wants, but we will leave that aside for the moment. This Government recognise the role regulation has to play for customers, which is why we have strengthened it. We have ensured that when an energy firm is fined and punished, the money does not just go to the Treasury. Customers who have been wronged are now properly compensated; we have put money in their pockets. We are even introducing criminal sanctions into the regulatory armoury. In the future, if an individual is found guilty of manipulating the energy market, they could go to prison.

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[Yasmin Qureshi]

Will the right hon. Gentleman give way?

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. The right hon. Gentleman is not giving way.

[Mr Davey]

The right hon. Lady really must tell the House, would she have pressed the nuclear button yet? Is there one example of energy company bad behaviour that she thinks would have merited her policy?

Ofgem could close an energy company down, but it would have to give that firm the chance to improve. If a company ignored improvement orders, Ofgem could then issue a final order, and if that was ignored, it could then close the company down under current law. But the right hon. Lady seems to want the regulator to be able to intervene before an improvement process has been gone through—before a final order.

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[Yasmin Qureshi]

I thank my hon. Friend for that. There seems to be a difference of opinion. We say that the grounds on which a licence can be revoked are very limited and technical. If I understand the Secretary of State correctly, he is saying that there are much wider grounds for revocation. Perhaps the way to resolve the dispute would be to take advice from expert legal counsel as to whether, legally speaking, our position or that of the Government is correct, because that way—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. I appreciate that the hon. Lady waited a long time to make an intervention, but it is not a speech.

[Mr Davey]

I reassure the hon. Lady that we have legal advisers in the Department, as does Ofgem.

Looked at together, the Labour party’s proposals—not just the one before the House today—are clearly designed to upset the current balance between competition and regulation. Labour seems to want to rely on more heavy-handed regulation and even price controls to try to micro-manage energy costs and customer service standards from the desk of the Energy Secretary in Whitehall. We know what the consequences of that approach are because we have seen them before: distorted markets, reduced competition, poorer service and lower investment.

Let me gently remind the right hon. Member for Don Valley of her party’s record in government and, indeed, in opposition. The Labour Government set up Ofgem and decided what powers it would have, and when they realised they had got it wrong they reformed Ofgem. In opposition Labour decided it would scrap Ofgem. Now it seems to have U-turned and is looking at Ofgem’s powers instead. First, Labour proposed making Ofgem force companies to track wholesale prices in their retail prices, something which would destroy forward markets and force energy companies to purchase energy in the short-term markets. That is bad news for their customers, as I demonstrated the last time we debated energy policy. It is a recipe for chaos and yo-yo bills, with prices as volatile as the wholesale markets themselves, and on average higher than now.

Now the right hon. Lady proposes to lower the bar on the most extreme sanction the regulator has—revoking a licence, putting companies out of business, reducing competition and causing chaos for their customers. One has to think very carefully before changing the existing power to revoke a licence.

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[Several hon. Members]

rose—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. Before we proceed, I should point out that, although there is plenty of time for this debate and a relatively small number of colleagues have indicated that they wish to speak, the speeches so far from the Front and Back Benchers have been so extraordinarily long that I have to ask Back Benchers to please keep their speeches to around 10 or 11 minutes. If they show that courtesy to other Members, everyone who wishes to speak will have a chance to do so.

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[Several hon. Members]

rose—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. I remind the House of what I said a few moments ago. Let us aim for 10 minutes please.